About 8 percent of Israel's population lives in rural areas, in villages, and two unique cooperative frameworks, the kibbutz and moshav, which were developed in the country in the early part of the 20th century.

Villages of various sizes are inhabited mainly by Arabs and Druze (the latter comprising 1.7 percent of Israel's population). Land and houses are privately owned, and farmers cultivate and market their crops on an individual basis. A minority within the Arab sector, traditionally nomadic Bedouin Arabs (estimated at 250,000 people) is currently undergoing an urbanization process, reflecting the transition from a traditional society to a settled, modern lifestyle.

The kibbutz is a self-contained social and economic unit in which decisions are taken by its members, and property and means of production are communally owned. Today 1.7 percent of the population lives in 267 kibbutzim. Members are assigned work in different branches of the kibbutz economy: traditionally the backbone of Israel's agriculture, kibbutzim are now increasingly engaged in industry, tourism, and services. Many kibbutzim have modified their traditional collective approach and are in various stages of privatization.

The moshav is a rural settlement in which each family maintains its own farm and household. In the past, cooperation extended to purchasing and marketing; today moshav farmers have chosen to be more economically independent. 441 moshavim and moshavim shitufi'im comprise some 3.5 percent of the population and supply much of Israel's agricultural produce.

The yishuv kehilati (community settlement) is a new form of rural settlement, with each of the 107 existing communities comprised hundreds of families. Although each family's economic life is completely independent and most members work outside the community, the level of volunteer participation of members in community life is very high.

The central governing institution is the General Assembly, made up of the heads of each household, which sets and passes the community's budget at its annual meeting.Alongside management and oversight committees, a number of working groups deal with areas such as education, culture, youth, finances and the like. A paid secretariat runs the community's day-to-day affairs according to the decisions of the elected bodies. New members are accepted only with the approval of the community.